A task station that originally cost $5,000 has no estimated salvage value and was depreciated at the rate of 20% per year (straight-line depreciation).At the end of the second year,it was sold for $2,500 cash.The transaction would result in a:

Question

Quizplus · Accepted Answer

Straight-line depreciation rate = 20% per year
Depreciation expense per year = 20% x $5,000 = $1,000

At the end of the second year, accumulated depreciation = 2 x $1,000 = $2,000
Net book value = Cost - accumulated depreciation = $5,000 - $2,000 = $3,000

Since it was sold for $2,500, the transaction resulted in a loss of $500 ($3,000 - $2,500 = $500). Therefore, the answer is C, loss of $500.

A Task Station That Originally Cost $5,000 Has No Estimated